Many sources list this process. Unfortunately, most of them are not clear,
they overcomplicate the process, and leave out important information. Here
is a straightforward process with screenshots for all the Nero settings.

First - a Note about SP1 vs SP1a, and JAVA

I used to recommend to everyone to
NOT use SP1a because it does not have a JAVA VM !! Microsoft
dropped support for SUN Java. The original SP1 came with MS JAVA VM v3805
which contains the core engine of the JAVA VM. But Sp1 is now almost impossible to find (I have it, but it is a
monster 133 MB download, so I do not supply it). But there is a much
easier fix for this, as we will discuss next.

Oddly
- Microsoft's JAVA VM update v3810, which comes with SP1a, is not an actual JAVA
VM !! It is only a security Update - it does NOT contain the JAVA VM base
code required to run JAVA !!

So if you installed WinXP
and then applied SP1a, your JAVA will not work. It does install the JAVA
VM update (v3810), in case you already have a real JAVA VM installed. But
the update alone does nothing without the underlying JAVA VM.

Fortunately, there is a simple workaround !! You can transform your
SP1a into SP1. The only difference is the version of MS JAVA VM, so all
you have to do is the following:

NOTE: malicious code can exploit a security vulnerability in
versions <3809 which could allow a trojan to be installed on a machine just
by viewing a webpage. So after you reinstall the MS JAVA VM v3805 make
sure to upgrade it to 3810 !!

go HERE
to test your PC for support of JAVA 2 and to list which version of the JAVA
VM you are running (i.e. this test is for SUN Java v1.4x which SUN calls
version 2, or J2SE).

Now, creating an XP Bootable CD with SP1 Slipstreamed In

Why Slipstream SP1 in ??

Combining XP and SP1 on the same installation is called
"slipstreaming". This way, the next time you reinstall your OS, you don't have to reinstall
SP1 afterwards, which can be problematic. This gives you one CD with
everything on it, and it will also operate just fine when WinXP asks you to
"Insert CD" during driver installations and adding Windows Components.

Basic Steps

l Nero Fix - there is a problem where when you've burned a bootable NT4/W2K/XP CD-Rom using Nero. and then When booting
with the CD you may get the message
"BOOT: Couldn't find NTLDR". The fix requires a simple
registry change and is listed below. l Create 3 temporary directories in the C
Drive - for the XP CD files, SP1, and the XP boot image. The folder
names do not
matter.l Copy your XP Pro CD files to
the XP folderl Extract the contents of SP1 to
the SP1 folderl Slipstream SP1 with XP l Burn the Slipstreamed files to a cd,
making sure that the software is configured to use the XP boot image

Other Methods

Included here for comparison. It is best not to use SP1a, so Method1 is not
recommended:

create three folders to contain the CD contents, service pack,
and the boot image file. You can use any names for these folders. We
will use WinXP-CD, XP-boot, and XP-SP1 - this example has placed them
directly under the root of F drive

copy the entire WinXP CD to the WinXP-CD folder

download SP1 to F:\Download
(Microsoft has removed it - get it from ftp://sqr.myftp.biz/ -
133 MB !!)

extract all files from SP1 (if you have not done this
already) to XP-SP1 as follows:

NOTE: alternatively, you can use WinRAR to
extract the files

download the service pack to a temporary folder - in this
case, F:\Download

Start/Run . . . cmd <Enter>

this opens a DOS box - now type in the Service Pack file
name followed by the -x option, and it will ask you where your want the
files extracted to (select F:\XP-SP1):

copy the boot image file to XP-boot (you can DL it Here, or
extract this file from the XP CD using ISO
Buster - the file here is called XPboot.bin - the
extracted file will normally be called Microsoft Corporation.img but I
have also seen one named Arnes Boot Record.img - they are all the same
2k file, either way

Step 3) Slipstream SP1 and XP together

Keep the DOS box open

CD down to the "Update" folder of the extracted SP1
(type: cd \XP-SP1\update)

enter the following:

this will apply the SP1 files to the WinXP CD files, updating that folder to
a slipstreamed install

NOTE: or use a dash instead of a slash - both will
work: update -s:F:WinXP-CD

Step 4) Burn the CD with Nero

Start NERO BURNING ROM and select New Compilation - CD BOOT

Drag & Drop all files from the c:\winXP folder from the right pane to the
right pane (the Compilation Pane)

Select "Recorder" Menu and select your CD Writer from the list

Select "Write CD" from the File Menu to bring up the
settings tabs.

Nero Settings (the tabs)

NOTE:
the following screenshots are from Nero's "Burning ROM"
utility - which is part of the 6.0 suite, or standalone for earlier
versions of Nero